Funds warn taxman poses 'threat' to lost super
Active superannuation accounts of less than $2,000 are at risk of being transferred to the taxman because the money could be classified as ''lost'' under a new government policy, the industry says.
In a move forecast to raise $555 million this financial year, the government last month raised the threshold at which lost superannuation accounts are automatically moved to the Tax Office.
However, industry groups say that under the current definition of ''lost'', the change could have unintended consequences for members, especially those on lower wages.
At present, super accounts are classified as lost if they have less than $200 and the member is ''uncontactable'' – meaning two letters to their last-known address have been returned unclaimed.
From January, the government plans to raise this threshold to $2,000, a move it says will save members from paying unnecessary fees. But super funds say such a change would also cause thousands of active accounts to be transferred to the taxman, because the $2,000 threshold could take in lower-paid workers and people who are new to their jobs.
The Association of Superannuation Funds of Australia told a Senate committee that as currently drafted, the laws would result in a ''substantial" number of active accounts being transferred to the ATO.
The Australian Institute of Superannuation Trustees said the problem was most likely to affect new employees, young people, and low-income earners.
''Unfortunately, the legislation will... result in uncontactable members with account balances of less than $2,000 who are still employed and receiving contributions being transferred to the ATO,'' it told the inquiry.
Aside from this ''technical'' issue and the potential for members to lose insurance benefits, the funds are broadly supportive of the changes.
Members can reclaim their lost funds from the Tax Office, which will pay interest equivalent to inflation on their unclaimed super under the change. At present, no interest is paid.
Treasury's submission said super funds had to make a ''reasonable'' effort when trying to determine if a member was "uncontactable."
For instance, it said a fund may also contact an employer in cases where contributions were still being made to member accounts, or it may engage a company such as Australia Post to try to track down the member.
The government also argues members can benefit from their money being transferred to the Tax Office because they will no longer be charged expensive management fees, and the ATO is well placed to reunite members with their money.